Historical index of human development on Scandinavian countries 1820-2020 : construction and interpretation

Abstract

This thesis calculates and analyses wealth through the Historical Index of Human Development, which is constructed to account for both economic (GDP per capita/income) and social variables (life expectancy/health and education). Through three research questions we explore and analyse: (1) what the human development levels were for Denmark, Norway and Sweden from 1820 to 2020, with 2019 being our last year for our time series. (2) How well economic growth reflects human development. (3) How much each parameter of the HIHD contribute to its development. To analyse these questions we (1) construct the HIHD by first calculating the indices for income, health and education for our time period in question. This we analysed through a comparative analysis where we found that: all Scandinavian countries were at least at the OECD average in the 19th and 20th century and that among these Denmark and Norway were above this average while Sweden was around it. Additionally, we discovered that Norway and Denmark were at more or less the same level during the 19th century. During the 20th century all three countries outpaced the average of the wealthy OECD. The short run development was significantly more uniform between Sweden and Norway than between Denmark and Norway. Further, we (2) conducted a quantitative analysis of the relationship between GDP per capita in fixed prices and the HIHDs for Denmark, Sweden and Norway finding that there is a high correlation between the long term HIHD and GDP per capita. That the short term corelation is not as strong as the long-term, due to larger fluctuations in GDP than HIHD. We also found that GDP per capita does not reflect human development to a satisfactory degree and, therefore, also fails at reflecting living standard and economic development. Finally, we (3) analyse GDP, education and life expectancy’s relative weights in annual HIHD series which helped us deduce that GDP per capita is the most important contributor to HIHD, but it declines in importance over time. Education was and is the second largest contributor with its contribution increasing moderately. Life expectancy was and is the lowest contributor, however, its contribution doubled from 1820 to 2019. Norway’s surprisingly well performance during the 19th century is largely due to their high life expectancy rates. Sweden was clearly inferior to Denmark and Norway in writing skills during the first half of the 19th century, which made their HIHD fall relative to their Scandinavian neighbours.